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1. Effectiveness of communication – i.e. readability, legibility, grammar, spelling, neatness, completeness and presentation will be a minimum threshold requirement for all written work submitted for assessment. Work that is illegible or incomprehensible and does not meet the minimum requirement will be awarded a fail grade.

2. Demonstrated understanding - This will be evidenced by the student's ability to be dialectical in the discussion of contentious issues.

3. Evidence of research - This will be evidenced by the references made to books, journal articles and inclusion of a bibliography.

What is Financial Statement Reporting?

Financial statement or reporting refers to a proper record of activities, operations and position based on finance of a business entity. Financial information which is relevant is presented in a formal and systematic way facilitating the user in understanding and implementing. These are inclusive of fundamental financial statements, escorted by a managerial analysis and discussion. For large-scale companies, these statements result as complex and might be inclusive of a wide group of footnotes and working notes on financial reporting and managerial discussion and analysis. Such notes depict all items in P&L statements, cash flow statement and balance sheet in additional details. Financial statement notes are stated as an important part of the financial statement.

The goal of common purpose financial statement is to offer reliable financial information regarding the reporting enterprise that is beneficial to the current and future investors, borrowers and other related creditors while decision making regarding offered resources to the enterprise. This information is required to be supported by proper disclosure to enhance the understanding of users. The decision making is engaged in trading or retaining long-term financial instruments and offering or settling other types of credit. In order to consider the prospects of entity for the future cash inflows and outflows, current and expected investors, borrowers and other related creditors require information regarding the entity resources, claims, the efficiency of overall conduct, and board that have delegated the responsibilities to  make use of resources of the entity.  

For example, responsibilities are inclusive of securing the resources of the entity from unpredictable impacts of economic variables like price, technical changes while making sure that the company has adhered to the viable laws, provisions and regulation. Information regarding the delegation of the management of their responsibilities is very useful when it comes to decision making for investors, borrowers and other elated creditors having the voting right or it can impact the managerial actions.

Directors have the key responsibility for the management and provision of beneficial and useful information for the financial statement users such as investors and creditors.

Accountants usually do preparation of financial statement that might be inclusive of monthly or yearly or accounts on the basis of financial information which is complied with laws and appropriately analysed. To prepare the financial management reports, it can be inclusive of precise on a quarterly basis and year-end closing reports. The reports which are complied might be put to use for ongoing support and budget management to predict potential activities. Further, the financial report might be implemented by a finance director for the use, development and activities of financial systems of the company, for example; CODA Financial Management, Hyperion and Excel.

Goal of Financial Statement Reporting

The Directors are a liable financial statement prepared according to the viable law and regulation. Further, the directors opt to do preparation of a financial statement on behalf of Group while complying which IFRS, along with they are selected to the preparation of financial statement for the Company as a whole in accordance with the Australian accounting standards.

The financial statement reflects fair information for every financial year, about the financial performance, position and cash flows of the Company. This needs faithful representation of the transactional effects, other situations and events according to the meaning and realizations terms for assets and liabilities as well as income and expenditure paced in the IASB framework for the reflection and preparation of financial statements.

The directors are liable for maintaining accurate records of accounting which reveal with the realistic accuracy every time while considering the Company’s financial position, for securing the assets, and taking effective measure the avoidance and monitoring for fraud and wrongdoings while preparing the remuneration reports by directors.

Further, accounting principles are required to be considered while recording financial transactions in which reporters are required to consider the fact that all cost are not assets. Therefore, only capital costs are required to be recorded as assets which can provide future economic benefits and it is not concerned with the amount incurred.


External auditors, (in case an audit is needed, or the firm has opted to have one) conduct the independent audit of the financial reporting. This is to be ensure that users are not forced to tolerate the intolerable. Further, the external auditors are required to report to the stakeholders by a reporting based on the external audit. Involvement with the external auditors is usually considered by the directors in support of the shareholders or investors. Daily interaction at the time of audit process is generally among the managerial authorities and the external auditor.

Financial statement is not merely ritual. A financial statement is stated as a straightforward activity that emerges with a range of complex ethical issues, contravenes which can cause main scandal and disgrace for the company and result in the immense amount of investor loss and customer trust. Most of the scandals related to accounting over the last few decades have been the focal point of the deceptive financial statements. Further, the deceptive financial reporting refers to the misstatements held on the financial statement by the management of the company. Generally, this is conducted with the purpose of misleading investing and keeping the share price of the company. While the impacts of the deceptive financial reporting might stimulate the stock prices of the company even the short haul, almost there are bad effects as considered in the long haul. This focus of short-run is given in the financial aspects of the company which is at times called myopic management.

Preparation and Analysis of Financial Management Reports

Financial reporters are required to comply with all ethical aspects to ensure prevention of misleading facts. In fraudulent financial reporting, violations which are disclosed are considered as an error of the omissions based on ethics. Recording transactions intentionally in a way that is not complying with the widely agreed standards are known as fraudulent financial reporting, and failing to disclose accounting information to the shareholders can make changes investment decisions by the investors in the company, and it can also be stated as fraudulent financial reporting. Executives of companies are required to take steps very carefully; it is significant for the management to secure the confidential and proprietary information of the company. On the other hand, in a situation where this information is related to an important event, it might not consider ethical and viable to maintain this information from the investors.

Too Much information can be as disconcerting as too little.”- Patricia Wentworth. Same goes for too much information disclosure in Financial Statements. Generally, investors find financial reports too long, and that dissolves the literal purpose of the statement in the first place. Generally, company’s does not keep in mind before drafting the Financial Statement is that the investor may or may not have sufficient time to read it also, even if he/she invests a certain time still they may not find the actual and relative information in the huge hurdle of the financial report. The information is not crisp and to the point. The company also invests a good amount and time to prepare the financial statement, and if it doesn’t solve the purpose, then the cost spent actually goes into turmoil.

An investor may lose interest in investing in the company: When an investor actually goes through the entire financial report, and if that financial report has too much information then there is a slim yet solid chance that investor may lose interest in investing in the company. It is because stakeholders may find some information that diverts their attention from investing or it may create some sort of mistrust in the company. This small mistake can be really harmful to the company.

It confuses the Investor:  The main purpose of a financial report is to inform but rather than that it confuses the investor. When too much information is provided in the financial reports, it actually distracts the investor from the important and relevant information. In the hurdle of the information they have to find the needle of useful and necessary information, and it is certainly a lot of work. Not just that, when to information is provided people tend to overlook the overall information too.

The Role of Directors in Financial Statement Reporting

It distracts from the purpose: Investors associate multiple purposes to the financial report; they seek relevant and useful information instead due to disclosure overload they get distracted from the right information and end up reading irrelevant information on different topics. This can create dissatisfaction in the minds of investors.

Waste of time and money: The financial reports are very useful as they are insight of company’s current and future financial position and because of that company ends up putting a great deal of cost into it. Now the cost is just the money spent in order to create the report but also the time that company invests in it. But due to disclosure overload, the unnecessary information is also in the financial report. So the efforts, time and money that are being put into financial report become useless.

At the time of drafting the financial report, the company must keep reader’s perspective in mind rather than involving too much information. The company should keep 7c’s of communication while drafting the financial report in the following manner:

The information must be clear and concise, easy to read and the reader can easily find the topic which he/she finds relevant. Only useful and relevant information should be covered in the financial report. The company should know and filter the useless information and put everything that investor will find suitable. The financial report must provide a concrete and clear picture to the reader. All the unnecessary information should be omitted. Correct doesn’t indicate the grammar or medium; it means that report should fit the audience. The information provided has to be Coherent and to the point.  In order to filter out the unnecessary information, the company should not skip any important information to ensure financial reports are complete. The information Courteous be open, honest and connect easily with the reader. 

Financial instruments are referred as assets which are eligible for trading. They can be considered as capital packages that might be traded. Financial instruments mean documents like futures, options, draft, share, bond or contract having financial value or stating a legally binding contract between two or more than two parties about the right to pay money.

A financial asset refers to an intangible asset whose value is gained from a claim based on a contract like stocks, deposits and bonds. Financial assets are highly liquid compared to other physical assets, for example, property or commodities or real estate, and its trading is eligible in financial markets. Financial assets can be regarded as cash in hand, or aided accessibility and convenience in terms of cash deposits, markets securities, checks, accounts receivable and loans.

Accuracy and Ethical Considerations in Financial Statement Reporting

Financial liability means a contractual binding to serve monetary or other related monetary assets to another enterprise or to transfer financial assets or liabilities with another enterprise. The settlement of an agreement that would or might be done in the individual equity instrument of the entity which is a non-derivative by which the enterprise might serve own equity instrument’s variable. Or either a derivative that would be settled probably excluding the cash exchange or the same for an equity fixed amount of an entity.

A derivative is an agreement between two or more than two parties, and its value has a reliance on the binding underlying asset such as security or assets such as index. General underlying assets are inclusive of stocks, interest rates, bonds, currencies, market index and commodities. Derivatives are those contracts whose value has a change when there is a change in the underlying asset. It is financial instruments which need no investment on an initial basis, and is settling is required at a future date on the later basis.

According to AASB 139, classifications of financial assets are done in ways described as below:

Financial assets at their fair value by P&L

Financial assets which are available for sale

Loans and receivables

Investments which are held to maturity

Financial assets classification is identified on the bases of the management of financial assets by an entity and the cash flow nature that take place from financial assets.

Measurement of Financial assets shall be done at their fair value inclusive of transactional costs for the assets which measurement is not done at fair value by P&L. Fair value means the price that will be obtained to put the asset into sale or paying of transferred liability in an orderly transactional manner among market contestants at the date of measurement.

Yes, this is a financial instrument, it is because the definition of financial instrument states that FI are assets which are eligible for trading and it can also be capital packages. These assets might be in the form of cash or a contractual right in order to distribute or obtain cash or any other type of financial instrument. By considering this aspect in the present case, CBA has right to take physical delivery or to pay or receive net settlement in cash, and this factor satisfies the definition of the financial instrument.

Hedging instruments refer to an instrument which cash outflows or fair value are likely to balance changes held in the same of the opting hedged item.  Hedging instruments are known as an instrument implemented by investors in order to offset the risk of loss of money with the invested or retained investment.

Hedged item means an item that provides risk exposure to the enterprise in fair value or cash inflows and outflows in future basis and is considered or opt as hedged. A hedged item could be a particular realized asset or liability, set of assets or liabilities, held to maturity investment, entity commitment, net investment, credit risk, a part of cash inflows and outflows or financial asset or liability fair value.

Biddle GC. The Role of Financial Statements in Reporting Financial Performance. In Accounting & Finance/IASB Research Forum 2015.

Campbell JL. The fair value of cash flow hedges, future profitability, and stock returns. Contemporary Accounting Research. 2015 Mar 1;32(1):243-79.

Di Pietr A, Ay M, Art S, Ronen J. Accounting and regulation. Springer,; 2016.

Fabozzi FJ, editor. The handbook of financial instruments. John Wiley & Sons; 2018 May 14.

Hoyle JB, Schaefer T, Doupnik T. Advanced accounting. McGraw Hill; 2015.

Jiang Y, Ho YC, Yan X, Tan Y. Investor Platform Choice: Herding, Platform Attributes, and Regulations. Journal of Management Information Systems. 2018 Jan 2;35(1):86-116.

Kwok BK. Accounting irregularities in financial statements: A definitive guide for litigators, auditors and fraud investigators. Routledge; 2017 May 15.

Marzouk M, Linsley P, Verma S. A Critical Review of Risk Reporting in Financial Statements. 2015.

Nobes C. International Classification of Financial Reporting 3e. Routledge; 2014 Aug 7.

Pepi M. The Usefulness of Financial Statements in Making Financial Diagnosis. Ovidius University Annals, Economic Sciences Series. 2016 Jan 1;16(2):583-8.

Ramirez J. Accounting for derivatives: Advanced hedging. John Wiley & Sons; 2015 Jan 28.

Reid W, Myddelton DR. The meaning of company accounts. Routledge; 2017 Sep 29.

Titman S, Keown AJ, Martin JD. Financial management: Principles and applications. Pearson; 2017 Jan 9.

Trevino LK, Nelson KA. Managing business ethics: Straight talk about how to do it right. John Wiley & Sons; 2016 Sep 13.

Vasarhelyi MA, Alles MG, Kogan A. Principles of analytic monitoring for continuous assurance. In Continuous Auditing: Theory and Application 2018 Mar 8 (pp. 191-217). Emerald Publishing Limited.

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